(a) Any medallion valid under this subchapter may be encumbered with a lien or other such evidence of debenture. No such encumbrance shall attach to any medallion until the encumbrance is reported to the Taxicab Commission and recorded in the Registry of Medallions. No encumbrance duly attached to a medallion shall impair the right of the owner of the medallion to cause to be operated an automobile for hire on the island for which the medallion was issued, except when and if the medallion must be forfeited. No encumbrance which requires forfeiture of the medallion to the secured party upon default of the owner of the medallion shall be valid as to the forfeiture unless the secured party is determined by the Taxicab Commission to be an approved buyer. When the owner of an encumbered medallion subject to forfeiture to an unapproved buyer is in default on the encumbrance, the medallion shall be sold at auction by the Taxicab Commission to the highest bidder among approved buyers and the proceeds of the sale shall be paid the unapproved buyer. The auction shall be conducted in the manner prescribed by section 410 of this title.
(b) A medallion may be encumbered by more than one lien or evidence of debenture but the total of all encumbrances outstanding against any one medallion may not exceed $25,000. Each creditor takes his encumbrance subject to prior existing encumbrances. The Taxicab Commission shall take such steps as may be necessary to assure that the sale of any medallion is subject to the settlement of any encumbrances duly attached.